Stocks ticked higher Wednesday as tech and consumer stocks rebounded after a tame inflation reading but banks still dragged after credit downgrade.
Consumer prices rose just 0.1 percentin May, despite the rise in gasoline prices, after a flat reading in April. Over the past 12 months, prices have fallen by 1.3 percent, the most since 1950, the Labor Department reported.
The reading came as a relief that inflation wasn't any worse last month, but some market pros said it's not current inflation that is worrisome — it's the potential for a surge in inflation over the next two years.
The more troubling data point this morning was mortgage applications, which fell 15.8 percentto 514.4 last week, the lowest in nearly seven months, as rising mortgage rates scared away some buyers.
And the trade deficit fell nearly 35 percent to $101.5 billion in the first quarter, the lowest since the fourth quarter of 2001 during the last recession.
The market had started off the day on negative footing after FedExsaid its earnings outlook was lower than Wall Street anticipated.
Techs started lower but rebounded in afternoon trading, with chips up after a couple of upgrades.
Intel rose as the chip giant plans to abandon the Centrino brand of chips for PCs, the Wall Street Journal reported.
Qualcomm rose after Goldman added the chip stock to its "conviction buy" list.
Fellow chip maker Nvidia also rose after UBS upgraded its rating on the stock to "neutral" from "sell."
Adobe advanced after two price target increase and one decrease after the software maker posted its narrowest profit marginin more than 3 years but revenue fell less than expected. The company also said it would start charging users for an online version of Acrobataimed at heavy business users. They will charge $14.99 a month for the basic application, which allows for Web meetings of up to five users and conversion of up to 10 uploaded documents to pdf format.
Consumer stocks also rebounded, from department-store operator JCPenney to consumer-products maker P&G, credit-card provider MasterCardand fast-food chain McDonald's.
FedEx shares slipped after the package-delivery giant and economic bellwether beat earnings expectations but issued an outlook that fell short of analysts' projections.
Four banks started repaying their TARP loans, including US Bancorp, Goldman Sachs, Morgan Stanley and BB&T .
Morgan Stanley is also going to start allowing hedge-fund clients to place some of their holdings in a trust bank, a new layer of asset protection, in an attempt to win back hedge-fund clients it lost after it was forced to become a bank-holding company in order to get those federal funds.
Bank shares had opened lower following news of the new Obama financial-reform plan, but sunk deeper after Standard & Poor's cut its credit rating on 18 banksamid concerns about volatile conditions and tighter regulations. Among them were: BB&T, Capital One Financial, Regions Financial and Wells Fargo.
The S&P lowered its outlook on four other banks, but didn't cut their credit ratings. Those banks are: PNC Financial and M&T Bank , First National Bank of Omaha and Valley National Bancorp .
After details began trickling out, President Obama's financial-reform plan got mixed reviews.
Ralph Schlosstein, CEO of Evercore Partners, said the plan was "squarely in the middle," offering "rules that protect the system" while at the same time unleashing the "competitive spirits of capitalism."
But legendary investor George Soros warned against relying too much on regulators, in an opinion piece in the Financial Times.
Obama told CNBC in an interview Tuesday that the US is not in danger of overregulating the economy.
"If we've got rules of the road, that's what makes capitalism thrive," Obama said in a taped interview. "That's why people invest in this country."
The president said "most of these interventions" into the US economy—including the auto and bank bailouts—had already begun under President Bush and were only temporary.
"That's not something that we welcomed and the sooner we can get out, the better," he said.
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Oil fell toward $69 a barrel after official government data showed crude inventories fell by 3.9 million barrelslast week but gasoline inventories rose by 3.4 million barrels.
Commodity and heavy industrial stocks continued to slide, with Alcoa and Caterpillar joining banks at the bottom of the Dow pack.
The tone for the U.S. stock market is still — at least in the short term — a negative one. The Dow has suffered consecutive triple-digit losses, with both the Dow and S&P 500 chalking up their biggest two-day declines since late March.
Still to Come:
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed index; Earnings from Research In Motion
FRIDAY: Quadruple witching
Send comments to cindy.perman@nbcuni.com.